Indonesian Rupiah holds ground ahead of President Prabowo’s 2027 budget address

The Indonesian Rupiah maintained its stability prior to President Prabowo Subianto's 2027 budget address to parliament. Traders approached the situation with caution due to the impending budget proposal, which aimed to boost domestic consumption despite falling approval ratings and concerns over export restrictions on key commodities.

Market focus was also shifting towards Bank Indonesia's policy meeting the following week, the first session since the unexpected resignation of Governor Perry Warjiyo and a series of 100-basis-point rate hikes in May and June. The USD/IDR pair slipped lower as the US Dollar (USD) experienced downward pressure following a weaker-than-expected US inflation report.

Market attention shifted to the upcoming US July Retail Sales data, which was scheduled for release later in the day. Inflation figures from the Bureau of Labor Statistics showed that US wholesale costs for goods and services remained flat in July, falling short of the expected 0.2% growth, following a revised 0.1% decline in June.

Core Producer Price Index (PPI) rose 0.2%, slightly below market expectations of 0.3%. On an annual basis, headline PPI increased by 4.7% in July, while core PPI rose by 4.2% over the same period. This cooling inflation data altered expectations for Federal Reserve policy. According to the CME FedWatch Tool, there was now a 34.8% chance of a US rate hike at the upcoming September meeting, down from 40% following the PPI data release.

Forex analyst Jane Foley noted that "Fed rate hike speculation has recently suffered a setback on the back of recent US data releases," which could further weaken the greenback. However, she warned that this softer Dollar narrative could be undermined if oil prices spiked again.